Also posted tonight on the THR’s website, former County Executive Eddie Diana may soon take a seat on the Orange County Industrial Development Agency, replacing board member Russel Vernon who is moving away.
The article is illustrated with a photo of Diana at his home. In the background is an intriguing painting of a building, that reminds me somehow of the same colors and tones of De Chirico.
The County press releases just continue to strain belief more and more each day. Today’s news, Saturday July 19, a midhudsonnews.com article with Steve Brescia, County Legislative Chairman and general ally of County Executive Neuhaus, justifying the planned layoffs:
“Even if some people don’t believe $60 million, let’s say it is a $40 million gap, that’s huge…”
How exactly is it a MATTER OF BELIEF? Either it is REAL or it is NOT REAL, and if it is REAL you can back up your statements, if it is NOT REAL you do not deserve to sit at the grownups table.
Then, I was catching up on my press releases, and curiously, even though I am subscribed to receive the economic development press releases from the county for some reason I did not get the one that came out on Friday, July 18–but that’s okay, since I easily found it posted on their home page, I guess. I subscribed again, so perhaps I can chalk this up to computer error? Anyway, it’s the latest Orange County Partnership/Orange County IDA hullabaloo, a “Shovel-Ready Policy” for Job Creation. You know, Steve Neuhaus is a loyal, good Republican and has to do his part to be business friendly, anti-taxes, and all that goes with the traditional Republican platform. So what does this involve? HANDING OUT $2 MILLION TO BUSINESSES FOR UP-FRONT EXPENDITURES.
What struck me most about this list is that the positions to be eliminated are primarily those that help the sick or the poor. That must fit in nicely with Mr. Neuhaus’s political ideals. Meanwhile, he can fork over $2 Million with little care or consideration, perhaps with some expensive alcohol and a cigar, to people he does not even know from out of town who casually say they might bring some jobs here, perhaps. Perhaps. And his second in command, Steve Brescia, backs up his leader’s ridiculous numbers and fantasy-land plans because that is what followers are supposed to do, no matter how crazy and ridiculous things get. We’ve seen it all before; how crazy things got with Eddie Diana, and everyone, or almost everyone said nothing.
I guess that is just how things work in Orange County, a cold, hard place if you are sick, or poor, or on the wrong side of the liars, and the cheaters, and the gamblers, who happen to be in control.
Page 4 of this document states that board meetings should be listed for the year:
• Post schedule of all board meetings at beginning of the fiscal year
Your website does include many helpful documents, but I feel this is an easily correctable omission that might encourage future public attendance and participation, and, at the very least, will increase the transparency of your agency.
Two years after former IDA Director Ed Lynch asked the Authorities Budget Office for more time to consider what to do about the delinquent Newburgh Local Development Corporation, it looks like the city has finally come to the conclusion to pull the plug.
A recent FOIL request to the ABO revealed that the city’s Industrial Development Agency and City Manager Richard Herbek had been given a warning by the ABO about the delinquency of the Local Development Corporation. The LDC has been getting warnings since at least 2011, when I wrote about them here and here.
From one of those earlier posts, dated June 13, 2011, I wrote:
Newburgh Industrial Development Agency chair Joshua Smith said the old NLDC bylaws describe the board “as the city council and the IDA. We have at least twice asked the council to join us in a meeting. I plan to raise the issue again at our next meeting.” That meeting will be June 20, at 7 p.m. in City Hall. [Emphasis added]
Following up on that, in a post from October 10, 2011, I wrote:
During that [June 20, 2011] meeting, the minutes state that “Mr. Whyatt proposes convening a special LDC meeting at which the IDA members can vote as a majority on any actions it deems necessary, such as obtaining banking records, determining assets, etc.”
However, it is not apparent that any action has been taken. NLDC last appeared as an agenda item at the July meeting, but the chairman preempted discussion by saying there was nothing to discuss, and moved on to the next agenda item. It has not reappeared since.
Teri Waivada, the IDA’s current executive director, shrugged off responsibility for the NLDC, stating that it has never met with the IDA’s current board members, although she believes the corporation is still active (which does not make any sense to me, unless by “active” she means it has not yet been officially dissolved):
For his part, City Manager Herbek writes that the city will be reviewing how to disband the NLDC:
Is there any reason to keep the NLDC? As I have written previously, local development corporations can do things that industrial development agencies can’t, such as provide funding for nonprofits. At the county level, our Orange Count Industrial Development Agency board asked the county legislature a few years ago to create the Orange County Funding Corporation, a local development corporation, for just this purpose. When Mount Saint Mary College was looking for bonding money to help pay for a construction project, they went to the OCFC, and were successful in getting bonds.
The Mount did not go to the Newburgh Local Development Corporation, if they even knew it existed. Should they have? Would it be a good idea for Newburgh to have its own funding entity for nonprofits and small businesses?
As someone who has sat through countless Newburgh IDA meetings, and a good many Orange County IDA meetings, as well as countless Newburgh City Council meetings, in my opinion it is just not worth it.
Officially the NLDC board is made up of the city council plus the IDA board. The IDA has toyed with the concept of doing something about the LDC, but they have a difficult enough time carrying on regular business as it is. In contrast, the county IDA (who make up the board of the OCFC as well) has a board that is a well-oiled machine, and includes financial professionals.
The Newburgh IDA cannot compete with them in terms of resources.
In this case, to get the NLDC operational again would demand meetings of the existing gigantic board of twelve members to come to a consensus about what to do, even if that is to appoint a new board and/or alter the NLDC bylaws. This idea seems preposterous, especially since the board has never met in the two or more years it has been officially listed as delinquent with the state.
To have one LDC to cover Orange County (I do not know of other LDCs in cities or villages of the county, although their existence would not surprise me) is perfectly reasonable.
The only potential thorn I foresee is that the NLDC board must meet to approve dissolution. Despite requests by the ABO for over two years, the city has dragged its feet. I wish City Manager Herbek luck in herding the cats.
In addition to whatever other accolades attorney Richard Golden can claim, such as former Orange County Attorney, he is proving himself a master as the Government Defiance Man. When the Orange County Industrial Development Agency was having some trouble with the fact that their Armory Grant was, oh, illegal, but they would never admit that or ask the State Comptroller’s office about it because the totally obvious answer was yes, this is totally wrong, they called in Government Defiance Man Rick Golden to figure out a way to let them do what they want–legal or not.
Government Defiance Man wisely knew not to ask the State Comptroller’s opinion, either, but came up with some reasoning that the Authorities Budget Office (part of the State Comptroller’s Division) shot down, albeit to a journalist and not directly to the IDA.
Repeatedly, I asked the Orange County IDA, including former Chairman Jim Petro and former Counsel Phil Crotty, as well as grantmaker Bill Kaplan, why they woudn’t just make a phone call and ask the Comptroller’s Office what they thought about the legality of this grant, but I never got an answer. I must not have been the only one with an eighth grade or better reading level who could understand the grant was illegal.
Now Rick Golden is defending County Executive Diana’s administration in the Valley View Nursing Home hearings. What does this involve? Yes–of course–more government defiance.
In a letter from Mr. Golden to the attorney advising the legislative committee, Mr. Golden explains his objections to giving testimony under oath, including this:
Those called to give sworn testimony will then have the specter of being the subject of a criminal prosecution for statements which turn out to be inaccurate but which flow from simple lapses in memory or hindsight attribution of constructive knowledge of certain documents, etc. This concern by County employees is particularly acute in the light of the political construct of the formation of the Committees. Although such prosecutions will likely not prevail, those County employees branded by Committee members with a simple accusation of perjury will bear that scar forever, and will be subject to the potentially crippling expense of a criminal prosecution against them, as the County cannot defend or indemnify them on matters arising out of any criminal charges.
However, Mr. Golden’s grip on perjury is slippery at best:
N.Y. PEN. LAW § 210.05 : NY Code – Section 210.05: Perjury in the third degree
A person is guilty of perjury in the third degree when he swears
Perjury in the third degree is a class A misdemeanor.
N.Y. PEN. LAW § 210.10 : NY Code – Section 210.10: Perjury in the second degree
A person is guilty of perjury in the second degree when he swears
falsely and when his false statement is (a) made in a subscribed written
instrument for which an oath is required by law, and (b) made with
intent to mislead a public servant in the performance of his official
functions, and (c) material to the action, proceeding or matter
Perjury in the second degree is a class E felony.
N.Y. PEN. LAW § 210.15 : NY Code – Section 210.15: Perjury in the first degree
A person is guilty of perjury in the first degree when he swears
falsely and when his false statement (a) consists of testimony, and (b)
is material to the action, proceeding or matter in which it is made.
Perjury in the first degree is a class D felony.
What does it mean to “swear falsely”? It does NOT mean, to use Mr. Golden’s terms, to make “simple lapses in memory or hindsight…” N.Y. PEN. LAW § 210.00 : NY Code – Section 210.00: Perjury and related offenses; definitions of terms, Paragraph 5 defines “swear falsely” thus:
5. "Swear falsely." A person "swears falsely" when he intentionally
makes a false statement which he does not believe to be true (a) while
giving testimony, or (b) under oath in a subscribed written instrument.
A false swearing in a subscribed written instrument shall not be deemed
complete until the instrument is delivered by its subscriber, or by
someone acting in his behalf, to another person with intent that it be
uttered or published as true.
Thus, perjury is knowingly lying. Why would our dear County Executive fear being caught knowingly lying, or having any of his employees caught knowingly lying?
The drama continues this week with hearings scheduled for Tuesday, Wednesday and Friday (monthly schedule here). Diana might be there Tuesday; if and probably not, we will have Golden’s magic act and slippery grip of perjury in his place.
When I read this, I immediately thought of the Newburgh Industrial Development Agency, which the Newburgh City Council had the “wisdom” to appoint an all-male, seven-member board in 2008. At some point, one of its members effectively dropped out, moving out of state, but it took a long time for the board to bother noticing that this was a problem that needed attention.
They are now looking for another board member–although the search process has been limper than overcooked noodles.
Perhaps there is a lady out there who could take on the dubious challenge of improving the collective IQ level and non-existent gender equity of this agency.
My second thought was about the Orange County IDA, which is one small point better than the Newburgh IDA on the gender equity score because IT has a WOMAN BOARD MEMBER! Imagine! How extraordinary. And unlike several of the Newburgh IDA board members, whose backgrounds are academic and/or nonprofit, Ms. Rogulski is a businesswoman–a banker–and she frequently says very intelligent things! I have heard them with my own ears!
But this does not raise the collective IQ of the County IDA anywhere close to where it should be, although it brings them perhaps to the early 1960s instead of the 1950s or the 1900s.
It must have been Ms. Rogulski’s sparkling intelligence that swayed Active Ventilation to pursuing the County IDA for benefits and giving up on the Newburgh IDA, even though they are located in the City of Newburgh. Not for long. Wawayanda beckons.
Instead, the Newburgh IDA has a proposal before the Newburgh City Council (that may be on the agenda for Monday night’s meeting) for a busywork project of making a database of small businesses–for which they are asking for a CDBG grant for $15,000. It is unclear to me now, as it was in February, when this proposal was first brought forward, several things:
a.) Isn’t this the kind of thing the IDA should be doing on its own dime? b.) Aren’t the CDBG funds better spent elsewhere? c.) Isn’t it totally pathetic the Newburgh IDA can’t do real work, like keeping Active Ventilation in Newburgh with its 30 or more jobs to be created, in manufacturing no less–how many US manufacturing companies are there these days–and instead we get these ridiculous projects a competent secretary could polish off in a few afternoons?
Memo to the Newburgh IDA: Women Board Members Needed. It’s Critical.
P.S. I admit, I also wondered fancifully if Mr. Petro had resigned to open up another spot for a woman, instead of some other reason, like holding the State Comptroller’s Office in contempt, but there is no record of any correspondence between the State Comptroller and Mr. Petro or his friend and fellow resignee IDA counsel Phil Crotty. How do I know? I FOILed for it. Although I guess you can’t FOIL telephone calls.
On December 6, The Newburgh Advocate received several documents in response to a Freedom of Information Law Request made to the New York State Authorities Budget Office regarding the Orange County Industrial Development Agency’s $500,000 grant to the Newburgh Armory Unity Center. Despite the fact that the transaction is illegal in multiple ways, all the players involved continue to look the other way and there has been no regulatory action apart from a limp report issued by the ABO.
It was back on June 24 that I first asked about the propriety of the proposed OC IDA grant in this post, “Can Orange County IDA give Armory $500,000?” In that post, I wrote that there are two main barriers to such a grant, according to the ABO, in that there is no statutory authority for IDAs to do this and that there is a “civic facilities prohibition” that has been in effect since 2008 and specifically prohibits the provision of financial aid to nonprofit civic facilities such as the Armory.
On July 18, I posted this Open letter to the Orange County IDA, I reiterated these two issues, in addition to a statement from the State Comptroller’s Office that “IDAs cannot give gifts/grants of their own monies.” I also asked the OC IDA to get an opinion from the State Comptroller on whether the grant is legal.
It is hereby further declared to be the policy of this state to protect and promote the health of the inhabitants of this state and to increase trade through promoting the development of facilities to provide recreation for the citizens of the state and to attract tourists from other states. The use of all such rights and powers is a public purpose essential to the public interest and for which public funds may be expended.
However, when asked to respond, the ABO clarified that the passage above is modified by §854, which limits the types of financial assistance industrial development agencies can give. (For the full explanation, see the post.)
At their August 17 meeting, the Orange County IDA made some technical changes to the grant, now calling it a “project expenditure” instead of a grant, and while the original plan for the grant had been to give the funds to the Armory to cover such expenses as personnel or other “soft costs” (since philanthropist Bill Kaplan’s foundation would be paying for the “hard costs” of construction, renovation, etc.) that aspect of the grant had changed, too. Now the grant would only be covering “hard costs” such as “construction, reconstruction, and improvements of the Newburgh Armory Building, or to furnish, equip, and maintain the building.”
Additionally, the structuring of how the money is given to the Armory changed–instead of giving the money directly to the Armory nonprofit (as originally planned) the IDA would reimburse receipts from vendors up to the yearly allotted amount of $100,000 for five years.
It is not clear how these superficial alterations, though, except the IDA from the civic facilities prohibition, for example, or any of the other ways in which this grant is not legal (no statutory authority, can’t give grants of its own money, etc.) Another lesser question I raised in the post on the August 17 meeting was whether there should have been a public hearing, since the law indicates that IDA projects of financial assistance in excess of $100,000 must have one.
What’s happened since then
On October 17, 2011, the ABO issued a Special Report on Industrial Development Agency Grant Awards to Private Entities. In it, the ABO examines grant awards given by 29 IDAs, including the Orange County IDA. While the report gives a good introduction to some of the relevant legal issues, it falls short in making definitive statements about whether or not these expenditures are legal, instead hedging statements with modifiers such as here: “Such awards would appear to be inconsistent with the ABO’s reading of General Municipal Law” (emphasis added.)
Also, at the conclusion of the report, the ABO closes with a milquetoast recommendation that the IDAs might possibly want to think about, if nothing else is going on:
The ABO does not question the intentions or motives of boards of directors in making these funding decisions. The purpose of this report is to raise, as an issue, how IDAs direct their money to community projects and private entities. As a result of this report, the ABO suggests that IDA boards undertake a thorough review of their organizations’ enabling legislation, missions, and financial assistance policies to make sure that all activities in which they are engaged are statutorily appropriate and mission-driven.
This is disappointing, to say the least. The mission of the ABO is, among other things, “[i]nvestigating complaints made against public authorities for non-compliance or inappropriate conduct,” and their powers and duties, among other things, are
Enforcing compliance with statutory requirements, including publicly warning and censuring authorities for non-compliance and recommending the dismissal of officers and directors.
Investigating and acting on complaints concerning the failure of a public authority to comply with State law.
Issuing reports of its activities, findings, analysis and recommendations.
Why would the ABO shy away from making a definitive legal statement, recommendation, or regulatory action of enforcing state law, which is one of its powers and duties?
The Untouchable Sacred Cows
With the Armory Grant, there are multiple sacred cows involved that I believe prevent public criticism of this grant, no matter on how many levels it is illegal. Instead, we must bow down and accept that these saints know best, even if it’s breaking the law, because to raise the slightest objection is to render oneself a persona non grata.
Bill Kaplan, the millionaire philanthropist, who offered to match the $500,000 grant and even offered to double it to $1 Million if the OC IDA would do the same (Mr. Petro deferred.) Mr. Kaplan is Newburgh’s most prolific benefactor, and while he is friendly and affable, who would want to provoke his wrath? I asked Mr. Kaplan why the Armory/OC IDA wouldn’t contact the State Comptroller Thomas DiNapoli’s Office for an opinion on this, but he said the IDA told him it was fine.
Deirdre Glenn, the executive director of the Newburgh Armory Unity Center, formerly executive director of Newburgh’s Habitat for Humanity. Ms. Glenn is another Newburgh legend. However, her saintly acts have not meant that she is incapable of making mistakes. For example, she pressured the city to give Leyland and Habitat a $300,000 loan at a time when banks refused to make such a loan. The city went ahead, despite dissension by Coucilwoman Mary Ann Dickinson, and a few years later, when the loan was heading toward default, the city ended up writing off $150,000 of the original loan. I do not believe Ms. Glenn or Mr. Kaplan have any particular interest in whether the OC IDA grant is legal or not, so long as they get the money.
Jim Gagliano, and, by association, the FBI. Mr. Gagliano was profiled in the New York Magazine love fest article, “Welcome to Newburgh, Murder Capital of New York,” from September 25, 2011. He is the supervisory FBI agent for the region, and also coaches basketball at the Armory on Saturday mornings. He showed up at a city council meeting when the contract with the Armory nonprofit was being considered, although he did not speak. With the local FBI head a blind supporter, who is going to trample on toes and quibble about the intrinsic nature of industrial development agencies promoting economic development?
The children. When in doubt, invoke the children. It happens all the time, and this case is no different.
The gang members. In the Orange County IDA attorney Philip Crotty’s letter to David Kidera, head of the ABO, in response to the ABO’s report mentioned above, Mr. Crotty writes that “[t]he Orange County IDA is doing its best to create jobs for our people young and old, whether they are gang members, community college graduates, four-year college graduates, or laid-off employees in need of a fresh start.” This is quite extraordinary.
The tourists. In the OC IDA’s correspondence and in statements made at meetings, a repeated justification for the grant is that it will generate “tourism” which will, in turn, presumably generate “economic development.” However, the numbers given at the July OC IDA meeting by Glenn and Kaplan seemed grandiose in terms of what the tourism/economic impact would be, and there was no justification for the numbers, and also no binding commitment to the IDA that these numbers would actually be met. This runs counter to initiatives and tightening of regulations both by Governor Andrew Cuomo and State Comptroller Thomas DiNapoli to ensure that expenses and projects run by IDAs actually deliver the benefits and impacts they say they will–or else.
Who’s doing the grilling?
The ABO has been thorougly informed of this situation but, to date, has taken no further action other than the report mentioned above. I have also been in touch with the State Comptroller’s office (with whom Mr. Petro, in conversation with me a month or two ago, would not give an answer as to why he would not just contact them directly.)
Perhaps there will be better luck with Attorney General Eric Schneiderman, from whose office I recently received an acknowledgment dated December 2 regarding my complaint.
Excerpt from the August 17, 2011 Orange County IDA meeting pertaining to the Newburgh Armory Resolution
Philip Crotty, Orange County IDA Attorney: The Newburgh Advocate raised some questions about the way we were disbursing the grant to the Newburgh Armory1. We discussed the matter among the three of us, Jim Petro, Jim O’Donnell and myself, and decided to ask for a legal opinion from the former county attorney, Rick Golden, who is a lawyer’s lawyer, frankly. He handles a lot of appeal work. He provided the opinion back to us during the past month, and suggested that we take a project, expressly because they are tourism related, like the Armory, and the Hall of Fame of the Trotter, the Firehouse in Montgomery, and those projects are tourism related, and they’re also in the realm of construction, reconstruction, or equipment, as distinguished from soft cost type things. These are bricks and mortar type operations. In the case of the Armory, bricks and mortar, and maybe basketball hoops.
So those projects are okay, for us to fund, but we should be funding them in one of two ways. Either pay the money to the municipality that then distributes it to the not-for-profit organization, that would be the City of Newburgh, or, better, to make the arrangements, the payment arrangements directly with the contractor, and have the contractor submit the voucher to us, we pay the voucher, and that’s the way he suggested that we handle it.
So with a view toward that I revised the resolution that we adopted last month, and if you’d like to call for a vote on that…
Jim Petro, Orange County IDA Chairman: Let me just do it real quickly in layman’s terms, not that you didn’t do a good job of it, though. Basically, if they put a new floor in, in the Armory, and they put their grass floor in and it’s $77,300, they would give us the bill for that, and the IDA would make the check out directly to the company that’s billing the $77,300. We would apply that towards the value of the $100,000 grant. And we would keep track of it in Laurie’s office, and when we get to that point, that’s what they would have coming.
But what I’m concerned with and always been concerned with is when we give out grant moneys and it doesn’t go to exactly what we’re suggesting that it went to, or the grant was requested for, and you know how I am with seed money, people live off seed money, so now…
Petro: Somebody should have paid our own grant.
Michael DiTullo: The building lost its power. So something must be going on.
Petro: So, you know what, let’s forget the darkness for a minute, and let’s finish this up while we’re all… Can you read that, Phil? You can’t see it.
Crotty: Well, I have a flashlight in my car, except [inaudible… multiple voices] Shall I continue?
Petro: Yes… I think everybody understands what I just said, right? So I think that’s the way we’re going to do it.
Crotty: Now therefore, excuse me, I’m not going to read all the “whereas”s as they’re the same as the last time, so it’s only the revised “resolved” paragraph.
Now therefore, be it resolved that this IDA authorizes a project expenditure to Newburgh Unity Armory Center, Inc. in the amount of $500,000 to be paid in installments over a five year period commencing in 2011 and not to exceed $100,000 per year directly to support financially the construction, reconstruction, and improvements of the Newburgh Armory Building, or to furnish, equip, and maintain the building in order to advance the project activities intended to occur by operation of those activities and through a license agreement between the CIty of Newburgh and the Newburgh Unity Armory Center, Inc. and subject to matching grant from the Kaplan Foundation and the 25 year license agreement between the City of Newburgh and the Newburgh Unity Armory Center and the IDA standard agreement.2
Board member: So moved.
Board members: Seconded.
Crotty: Resolution Adopted, 5 Ayes.
Brescia: Is this going to be paid directly to the contractor though?
Newburgh Advocate Notes
1 The questions raised by the Newburgh Advocate (here, here, and here) were not regarding the methods of grant disbursement by the Orange County IDA, but whether it is permissible for an IDA to give a grant at all. The only situation in which this appears to be allowed is when a federal grant is awarded to an IDA and the IDA acts as a pass-through to give grants, assuming that the federal grant permits this. This scenario does not apply to the Armory Grant.
2 The revised resolution does not use the term “grant” but instead “project expenditure” to describe the financial arrangement between the Orange County IDA and the Newburgh Unity Armory Center. If the OC IDA is successful in evading the grant prohibition, it remains unclear as to how it evades the prohibition against IDAs participating in civic facility projects.
There are certain requirements an IDA must meet for projects of financial assistance exceeding $100,000. Since the Newburgh Armory Grant/Project is a commitment of $500,000, wouldn’t the Orange County IDA have to follow these specifications? This would require a public hearing, as well as the IDA describing the project and the financial assistance.
Why not call the New York State Comptroller’s Office for an opinion regarding this?
Kudos to the OC IDA
The agenda for the monthly meeting this August was posted about a week in advance on the County’s website. Maybe next month the committee meetings agendas could be posted, too.
Youtube video of Armory discussion transcribed above:
Youtube video of the OC IDA Governance Committee Meeting, 2 p.m. 8/17/11:
Youtube video of the full OC IDA Board Meeting, 3 p.m. 8/17/11:
On Wednesday, July 20, the Orange County IDA voted unanimously to approve a $500,000 grant for the Newburgh Armory Unity Center, matching a $500,000 grant from the Kaplan Family Foundation.
OC IDA states its justification
In terms of justification in making the grant, Chairman James Petro read what he said was the IDA’s opinion on the matter, quoting what appears to be N.Y. GMU. LAW § 852:
Petro: I’m going to read something for the minutes… I want to get this into the minutes because there’s some question as to the validity of the IDA having anything to do with this project. So this is New York State Law… and that’s the end of it. It’s New York State Law. This is not an opinion from an attorney, it is not…
Board member: Jim, I think you need to give a little background.
Petro: I said that. I disagree. I just said that there’s other opinions, this is the opinion of the IDA.
Rogulski: He’s got an opinion, I think what it’s going to do is lend clarity to the fact that the IDA has the legal right to do what they’re contemplating.
Petro: Thank you. It’s also part of the resolution, but I’m going to read it because I feel it’s so important…. It is hereby further declared to be the policy of this state to protect and promote the health of the inhabitants of this state and to increase trade through promoting the development of facilities to provide recreation for the citizens of the state and to attract tourists from other states. The use of all such rights and powers is a public purpose essential to the public interest and for which public funds may be expended. With that, Steve… the governance committee met prior to the meeting?
Brescia: Yes, and the governance committee found that the project meets the three main criteria by which we judge for awarding grants: benefiting the county on a county-wide basis, job creation, and tourism. And we feel that this project… has that. And the committee unanimously endorses the $500,000 grant.
Authority Budget Office responds
The Authorities Budget Office is a part of the New York State Government whose mission “is to make public authorities more accountable and transparent, and to act in the public interest consistent with their intended purpose.” The Orange County IDA is a public authority and falls within the ABO’s jurisdiction. The ABO’s powers and duties include “overseeing the operations and finances of public authorities to assure they are acting in the public interest and consistent with their intended public purpose” (full listing here.)
When asked to comment on using this portion of the law to justify the IDA giving a grant, the ABO responded that
We preface our remarks by stating that these comments are not intended to be construed as a formal legal opinion, nor do we claim to know all of the facts and circumstances concerning the relationship between the Newburgh Armory Unity Center Inc., the Orange County IDA and the City of Newburgh.
It is our understanding that the Unity Center is wholly owned by the City of Newburgh and that the City has contracted with Newburgh Armory Unity Center Inc., a not-for-profit organization, to manage the Center. The Orange County IDA has no financial interest in the building and is not a party to the operating agreement. We also understand that this operating agreement allows the corporation to apply for grants in the name of the City, that any such grants are to be awarded to the City, and that these funds may be held in City accounts for transfer to an account used by the corporation to support the Center’s operations. In effect, the City owns the property but is dependent on the corporation to raise the funds necessary to operate, maintain and improve it. An IDA grant is one source of funding being pursued by the corporation’s board.
With that said, the following is intended to be a generic response and not specific to the situation you describe.
It is also our interpretation of section 852 of General Municipal Law that IDAs may use all powers and rights granted to them to further the purposes for which they were created. One of those powers is the ability to provide financial assistance to private entities. However, section 854 of GML limits that financial assistance to (1) mortgage recording tax exemptions; (2) exemptions from sales and use taxes; (3) real property tax exemptions; and (4) interest savings from the IDA’s issuance of tax exempt financing. This limitation prohibits awarding grants to private entities. Therefore, it could be argued that section 852 should not be read as to allow the awarding of an IDA financed grant to a private entity even if that grant is intended to be used for an accepted and beneficial public purpose, since such funding is not a right or power of an IDA. Moreover, it is unclear under what statutory authority an IDA could provide a grant directly to a municipal government, as the owner of a building, to underwrite the operations of that building.
An IDA could accept a grant from the federal government, the state, a local government or any public or private organization and use those funds for any purpose for which the IDA was created. (Emphasis added)
Newburgh Armory Unity Center has its own operating account
As stated in the OC IDA meeting, the License Agreement revision that was recently approved by the Newburgh City Council was a requirement for the OC IDA to give the Armory this grant. In fact, Mr. Petro and IDA attorney Philip Crotty were present when Newburgh City Manager Richard Herbek signed the document.
According to this license agreement between the City of Newburgh and the Newburgh Armory Unity Center, the relationship between the two may be slightly different than the ABO assumed in this passage. Specifically, Article 8 of the Agreement states that all revenue from the Armory will go into an Operating Account managed by the nonprofit, not the City. Additionally, it is not clearly defined how much, if any, excess revenue would be returned to the City:
Section 8.2 Revenues in excess of Operating Expenses. Revenues remaining after payment of Operating Expenses under the Operating Budget shall be retained by Manager as working capital toward the following year’s Operating Expenses, held as emergency reserves or applied toward Capital Expenditures. In the event, Manager determines that excess Revenues exist in the Operating Account, which are not otherwise needed as set forth in the prior sentence, then the Board of Directors of Manager may decide to issue to the City taxing authority a Payment in Lieu of Tax for some or all of the excess Revenue amount. (Emphasis added)
After being made aware of this arrangement, the ABO responded that
Our understanding of the application of GML does not change based on the scenario you describe.
On further review, Setion 9.2 of the Agreement allows the Armory to apply for grants in the city’s name, which, if awarded, would then be transferred to the Armory’s operating account. Whichever situation applies to the OC IDA’s grant, the informations provided by the ABO and the Office of the State Comptroller raise serious questions as to the legality of this grant.
Doubling their money
Just before the vote, Mr. Kaplan offered to double his money as a “challenge grant” such that instead of $100,000 a year for five years, he would donate $200,000 a year for five years, if the IDA did the same.
Mr. Petro responded that “I would answer it this way. We can’t do that today, but we’re always looking to do it in the future.”
Video below is the Orange County IDA discussion of the Newburgh Armory Unity Center Grant at the July 20 meeting.
There are three concerns the Newburgh Advocate wishes to bring to your attention.
1. Is the Newburgh Armory Unity Center Grant permissible?
The Newburgh Armory Unity Center (NAUC) at 321 South William Street in Newburgh promises to provide recreational opportunities for the city’s youth. Philanthropist William Kaplan has taken a great interest in the NAUC and promised to donate additional funds of $500,000 to the $100,000 his Kaplan Family Foundation has already contributed. The NAUC, through its executive director Deirdre Glenn, has proposed that the Orange County IDA provide a matching $500,000 to Kaplan’s grant.
Is it appropriate for the Orange County IDA to make a $500,000 grant to this nonprofit project?
A. According to the Authority Budget Office (ABO), IDAs do not have the statutory authority to give grants to public or private entities.
B. According to the Office of the State Comptroller,
IDAs cannot give gifts/grants of their own monies (see OSC opinion.) However, they are authorized to accept federal and state [more likely federal] grants (see § 858 and § 858(11)), and subject to the terms of those grants, they may be able to administer those grants. The “parameters” would be the terms of the grant by the state or federal agency.
C. According to the ABO, there is a prohibition against IDAs either “financing or participating in civic facility projects.”
D. A civic facility project is “any facility which shall be owned or occupied by a not-for-profit corporation organized and existing under the laws of this state or authorized to conduct activities in this state.” (Full definition here.)
F. In an agreement with the City of Newburgh, which received council approval July 11, this project seems to be a civic facility:
Section 5.1… It is expressly understood that no land, space, improvement, or equipment is leased to Manager and that Manager shall not acquire any property interest in the Facility whatsoever, other than the Licensed Uses, which shall permit Manager to have the use of the Facility and the right to occupy and operate the Facility in order to carry out the purposes of this Agreement. (In A-F, emphasis added.)
It would be a very unfortunate if the Orange County IDA’s portion of Kaplan’s matching grant turned out to be impermissible and had to be repaid. To prevent such a calamity, why not have the Orange County IDA ask the Office of the State Comptroller to render an opinion regarding the legality of this grant?
If it is deemed appropriate, the Orange County IDA would be secure to go ahead.
But if it is not appropriate, many people would be spared disappointment, inconvenience and embarrassment. And if it is not permissible, hopefully there would be a group effort to find a more appropriate governmental or private entity that could assist with the funding of this project and match Mr. Kaplan’s grant.
2. Philip Crotty and James Petro
James Petro is the Chairman of the Orange County IDA and, since May, has also been serving as an Orange County Legislator. The Orange County IDA Attorney, Philip Crotty, is also the Treasurer for “Committee to Elect Petro,” the campaign fund for James Petro.
When asked about this situation, the Authority Budget Office responded thus:
In the absence of additional information, the situation, as you describe it in your email, does not appear to violate any provision of the Public Authorities Law. Mr. Petro is legally entitled to serve on the IDA board and hold an elected county legislative position. We assume Mr. Crotty is a private attorney who has a contract to serve as the IDA’s attorney. We also assume that he receives no additional compensation from the IDA or from Mr. Petro to act as Mr. Petro’s campaign treasurer. We do believe that the potential for a conflict of interest arises should the IDA, or Mr. Petro, attempt to direct other legal business to Mr. Crotty’s private law practice as a result of his relationship with the IDA and Mr. Petro, outside of the scope of services he provides to the IDA under the terms of his contract.
Moreover, it appears that Mr. Petro and Mr. Crotty’s relationship extends beyond their roles with the IDA. Accordingly, it would be appropriate for this matter to be reviewed and discussed by the full board. Given this apparent personal relationship, the board may wish to consider seeking new counsel for the IDA to avoid the appearance of any potential conflict or personal favor. (Emphasis added)
The Newburgh Advocate hopes the Board will take this to heart and discuss the issue and do what is necessary to “avoid the appearance of any potential conflict or personal favor.”
3. Transparency and non-compliance of OC IDA website
While the Orange County IDA has managed to spend $10,000 to produce a six minute YouTube video, it appears to have done the minimum to have an IDA page embedded in the Orange County Government website. While some agendas and minutes are posted, there is no list of monthly meetings for the year with their times, dates and locations. An agenda is never posted in advance of the meeting.
On April 12, 2010, the ABO issued Policy Guidance No. 10-03, “Posting and Maintaining Reports on Public Authority Web Sites,” citing Chapter 506 of the Laws of 2009.
From Page 4 of that report, the following are required to be posted on the board’s website:
Post schedule of all board meetings at beginning of the fiscal year
Post meeting notices and agendas at least one week in advance of a board meeting Post all board meeting minutes within 14 days of meeting
Meeting minutes should be maintained on web site for at least two years following the date on which the meeting was held
Additionally, committees must comply as well:
Post notices and proposed agendas of all committee meetings at least one week in advance of meetings
Names of all committees and their members should be posted permanently, and updated as necessary
Post minutes within 14 days of committee meeting
Maintain meeting minutes for at least two years following the date on which the meeting was held
The Newburgh Advocate hopes the Orange County IDA will take some time to review the entire document of requirements as there may be additional items. Consider creating your own website, as neighboring IDAs in Sullivan, Ulster, and Dutchess Counties all do.
Most importantly, please post your meeting dates and agendas in advance, so that the Orange County IDA is more transparent and genuine when it says it is “open for business.”
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